The News: Microsoft’s Q4 FY 2024 earnings report highlighted a robust performance across its business units despite particular challenges in meeting market expectations. The company reported a revenue of $64.7 billion, a 15% increase from the same quarter in the previous year, and earnings per share (EPS) of $2.95, slightly surpassing analysts’ consensus estimate of $2.90. For the full year, Microsoft reported total revenue of $245.1 billion, reflecting an increase of 16% year-over-year, and up 15% in constant currency.
You can read the original earnings press release on the Microsoft website.
By the numbers:
- Q4 FY 2024 Revenue: Microsoft reported a total revenue of $64.73 billion for Q4 FY 2024, a 15.2% increase year-over-year.
- Q4 FY 2024 Earnings Per Share (EPS): The company’s EPS stood at $2.95, exceeding the analysts’ consensus estimate of $2.90.
- Q4 FY 2024 Net Income: Microsoft’s net income for the quarter was approximately $22 billion, reflecting solid profitability despite market challenges.
- Q4 FY 2024 Azure Growth: Azure, a vital component of the Intelligent Cloud segment, grew by 29% year-over-year, driven by strong demand for cloud services and AI integration, but fell short of analysts’ expectations.
- Q4 FY 2024 Operating Income: The company’s operating income reached $27.9 billion, highlighting strong operational efficiency and cost management.
- Full Year FY 2024 Revenue: $245.1 billion, reflecting an increase of 16% year-over-year (up 15% in constant currency)
- Full Year FY 2024 Operating Income: $109.4 billion, reflecting an increase of 24% year-over-year, and an increase of 22% on non-GAAP (generally accepted accounting principles) basis (up 21% in constant currency)
- Full Year FY 2024 Net Income: $88.1 billion, reflecting an increase of 22% year-over-year, and an increase of 20% on a non-GAAP basis.
- Full Year FY 2024 Diluted Earnings per Share: $11.80 and increased 22%, and increased 20% on a non-GAAP basis
Top and Bottom-Line Performance Drives Microsoft’s Q4 2024 Earnings
Analyst Take: Microsoft’s growth strategy is heavily centered on its AI initiatives, including its partnership with OpenAI and AI integration across its products, notably through the Copilot feature in Office applications. This AI-driven approach enhances user productivity and is a crucial driver of the company’s Azure business, part of the Intelligent Cloud segment. Enterprise customers’ adoption of AI services is critical to Microsoft’s continued expansion and double-digit growth trajectory.
Microsoft’s Q4 2024 earnings report revealed a solid financial performance, with total revenue reaching $64.73 billion, a 15% increase year-over-year. For the full year, FY 2024 period, the company reported total revenue of $245.1 billion, up from $211.9 billion the previous year.
For FY Q4 2024, the company’s net income rose to $22.04 billion, up from $20.08 billion in the same quarter last year. While Microsoft’s overall cloud revenue came in at $36.8 billion, in line with analysts’ expectations of $36.8 billion, the company’s Intelligent Cloud revenue, which includes its Azure services, fell short of expectations, notching revenue of $28.5 billion versus expectations of $28.7 billion.
As such, Microsoft’s stock experienced a post-earnings decline, due to the high expectations surrounding Microsoft’s cloud services and AI investments. While the overall financials were strong, the slight miss in Azure’s growth rate highlighted the competitive pressures from other cloud providers like Amazon Web Services and Google Cloud. Microsoft’s guidance for the next quarter was also slightly below market expectations, contributing to cautious investor sentiment. Nonetheless, the company’s leadership remains optimistic about future growth, particularly in the AI and cloud sectors.
Microsoft’s AI Contributions and Key Segments
A significant aspect of Microsoft’s growth strategy revolves around its AI initiatives. The company has positioned itself as a leader in AI, mainly through its partnership with OpenAI and the integration of AI technologies across its product suite. The introduction of Copilot across various Office applications exemplifies how Microsoft is embedding AI to enhance user experience and productivity. Copilot leverages natural language processing and machine learning to assist users in creating, editing, and optimizing documents and presentations.
AI’s impact is not limited to Office applications; it is also integral to the Azure platform, where AI services are offered to enterprise customers for various applications, from data analytics to advanced machine learning models. Adopting these services has been a critical growth driver for Azure, contributing significantly to the Intelligent Cloud segment’s performance. AI-driven solutions are expected to sustain Microsoft’s double-digit growth trajectory in the coming years, mainly as businesses increasingly adopt AI for digital transformation initiatives.
Intelligent Cloud: Overall, the company’s Intelligent Cloud segment, which includes Microsoft Azure, demonstrated solid growth, reaching $38.6 billion in revenue for the quarter. Azure’s revenue grew by 29%, driven by strong demand for cloud services and the increasing integration of artificial intelligence (AI) capabilities, contributing 8 percentage points of growth to Azure. However, analysts and the investor community had expected more robust growth, which raises questions about the future return on investment (ROI) from the company’s significant AI and cloud infrastructure expenditures. Indeed, according to CFO Ruth Porat, Microsoft spent $13 billion on capital expenditures, up from $12 billion in the prior quarter, noting that most of that spending is going toward AI.
Productivity and Business Processes: This segment, which includes Office 365, LinkedIn, and Dynamics products, continued to thrive. The segment’s success was fueled by ongoing demand for productivity tools and business applications, particularly in a landscape where remote and hybrid work models are becoming the norm.
Microsoft’s strategy of integrating AI into Office applications, branded as Copilot, has been particularly successful. This AI integration helps automate tasks, enhance productivity, and provide advanced analytics, making it a key feature differentiating Microsoft’s offerings in a competitive market. LinkedIn also contributed positively, benefiting from robust growth in its talent solutions and advertising services.
More Personal Computing: This segment includes Windows, Surface devices, and the Xbox gaming division. The segment grew moderately, driven by steady demand for Windows licenses and Surface devices. While facing some market headwinds, the gaming division continued to perform well, supported by solid content and service offerings, including Xbox Game Pass subscriptions.
Expanding the gaming ecosystem, new titles, and exclusive content helped sustain user engagement and revenue. However, concerns were raised about potential saturation in the gaming market and the impact of broader economic conditions on discretionary consumer spending.
Market Reactions and Future Outlook
Despite the strong performance in terms of revenue and EPS, Microsoft experienced some volatility post-earnings announcement. The market’s reaction was partly due to concerns over the deceleration in Azure’s growth rate and broader market conditions affecting tech stocks. The slowdown in Azure’s growth was particularly scrutinized, as it raised questions about the sustainability of the growth rates observed in previous quarters and the potential for continued expansion in a highly competitive cloud services market.
Moreover, the company’s high valuation also contributed to the market’s cautious stance. While Microsoft remains a highly profitable company with a strong market position, its future performance will likely hinge on its ability to maintain high growth rates in its core business units, particularly in cloud and AI services, while managing costs and investments in new technologies.
Microsoft is well-positioned to capitalize on several emerging trends, including the ongoing digital transformation across industries and the increasing adoption of AI. The company’s strategic investments in cloud infrastructure, AI, and its expansive ecosystem of products and services provide a solid foundation for sustained growth. However, Microsoft must navigate regulatory scrutiny, competitive pressures, and potential macroeconomic headwinds.
In summary, we believe Microsoft’s Q4 FY 2024 results showcase a company that continues to thrive across its core segments, driven by strong demand for cloud services, productivity tools, and innovative AI solutions. While there are challenges and market concerns, particularly around valuation and Azure’s growth trajectory, Microsoft’s comprehensive strategy and strong execution position it well for continued success in the technology sector.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses Microsoft’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author is a former employee of Infleqtion and holds an equity position in the company. The author does not hold an equity position in any other company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Microsoft Q3 FY 2024 Earnings: Revenue Up 15% Year over Year
Microsoft Unleashes Copilot and Potential 2024 AI Revenue
Facebook to Rival AWS, Microsoft, and Google in the Public Cloud?
Author Information
Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
